How Much Pension Do You Really Need?

Samsonite1

In a similar way - more than 50% of my outgoings are mortgage and full-time childcare, so I know that when retiring that these costs will be gone.

TBC15

jamesd wrote: »

One third each in cash, bonds and equities would significantly decrease either the income that can be taken or the chance of maintaining that income until death.

A cash target should really be at least a year or two of income from the investments so that you can use it to smooth out income variations. One year has been found by a study to improve success rate, longer periods/amounts not reported on.

A very crude guideline is to multiply the target income by twenty, assuming 5% income from investments. 25 is probably safer unless you are adding safety margin in some other way. A more sophisticated answer is to use a tool like Firecalc and look at the effects of past US markets on success rates or income levels and make a decision in part based on that. It is an excellent tool for helping to understand the effect of safety margins on success rates and acceptable income levels.

Thanks for all of that.

BeatTheSystem

I have been playing with (rough) numbers to see what we need, the first table is more or less how it is now:


PCMPAMortgage00Council Tax2002400Gas1501800Electricity1501800Water70840House Insurance20240TV lic12144Internet + cable tv60720Phones50600Food5006000petrol/diesel1501800Car Tax (2 cars)50600Car Servicing (2 cars)50600Car Insurance (2 cars)40480Car Depreciation (2 cars)4004800Going out2002400Clothes1501800Holidays (2 luxury)100012000House Repairs1001200Child 15006000Child 25006000Child 35006000White goods replacements1001200Random other (hobbies)1001200Total 5052 PCM 60624 PA

Below is if we ran only 1 car, didn't give the kids anything, went on one modest holiday, cut back on food and maintenance costs etc:


PCMPAMortgage00Council Tax2002400Gas1201440Electricity1201440Water70840House Insurance20240TV lic12144Internet + cable tv60720Phones50600Food3003600petrol/diesel1001200Car Tax (2 cars)25300Car Servicing (2 cars)25300Car Insurance (2 cars)20240Car Depreciation (2 cars)2002400Going out1001200Clothes1001200Holiday (one)4004800House Repairs80960Child 100Child 200Child 300White goods replacements80960Random other (hobbies)50600 Total 2132 PCM 25584 PA

The reality of what we will need is somewhere in between 25K and 60K. We like to run two cars as that gives us independence. My gut feeling is that we need 40K net income to have a decent stress free financial retirement, however that wont be super luxurious so aiming higher. I am starting to build decent sums up now but I am disappointed with the level of income being generated, in my experience investments tend to do less well then expected even with proper planning from professionals so my advice anyone reading is save twice has hard as you think you need to.


One of the earlier posts in the thread the writer was cautious and mistrustful over pension investing due to govt medling, I still think pensions is the way to go especially with 40% tax but I think once you have built up a good pension fund pot a spread of VCT's should be at least investigated to mitigate tax now and provide a long term tax free income stream.


good luck

Freecall

Samsonite1 wrote: »

........full-time childcare.........when retiring these costs will be gone.

I suspect that you speak for most of the population on that one.

ognum

Freecall wrote: »

I suspect that you speak for most of the population on that one.

You believe child care is expensive when they are young but believe me if you have the means there are always ways to chip in even when your children are adult!!!!

atush

In retirement not only do the costs of commuting go down, and work clothes but you are less likely to spend on lunches, coffes, etc on your way to/from.

then there are other costs that disappear like Nics, mortgage payments (we are thinking you are mtg free by then) in some cases you'll no longer need expensive life insurance.

sabelu

Ok so I have many questions re my SIPP and Occ Pensions. Forgive the scatter gun approach.
I currently have a 250k fund including savings, second property and the above. This has been gained through sensible investment and tenacity as well as a tax efficient approach. Just got 20k tax relief as a higher rate tax payer due to last years pensions contributions. We also have my wife's pension and of course the state pension, we are mid 50's, to look forward to.
Am I at my limit re pension we should get plus of 20k p.a. Pension expectation plus the state contribution? We currently earn 90k pa between us.
Should I slow up to be tax efficient in retirement?
Is my pension pot build becoming an obsession?
We have everything we want financially in life, what will be our needs in retirement.

As for my Occ Pension as i approach 55 I can take the lump sum and reinvest, my question would be, can I close my company pension, move the fund to my SIPP where I have greater investment opportunity? Then reopen so as not to lose the company contribution within the realms of the new legislation.

As for my SIPP the projection put together four years ago before new proposals starts low and gives me more as I get older, this to me seems the wrong way round I.e. If I could have greater income now at 55 when I need it I could semi retire now, will new proposals change this in my favour giving me more income prior to state entitlement?

I have seen flexible drawdown mentioned how does this differ from normal drawdown? What are the benefits? Will this only be subject to future drawdowns starting?

I also saw advice saying keep 1k in an open SIPP, drawdown the rest what would be the benefit of this?

Any views?

Freecall

ognum wrote: »

You believe child care is expensive when they are young but believe me if you have the means there are always ways to chip in even when your children are adult!!!!

Don't I know it!

:beer:

atush

250K should see an income of 7500-15K (3%-6%) depending on how it is invested.

Hard to say with a property in the assets, not knowing the yield after costs.

sabelu

atush wrote: »

250K should see an income of 7500-15K (3%-6%) depending on how it is invested.

Hard to say with a property in the assets, not knowing the yield after costs.

The drawdown illustration points to the higher figure ex a 20k lump sum, with the annual income increasing across the term.


As I asked earlier do the new proposed pension arrangements allow for more to be taken as income at the early part of the term?